Blockchain casino ZKasino was accused of stealing user funds worth $33 million
Blockchain casino company ZKasino funneled 10,515 ETH, equivalent to $33.9 million, into the Lido staking protocol instead of returning the funds to its users and investors.
At first glance, ZKasino looked like any other crypto project. The company announced a Series A round valuation of $350 million, backed by $26 million from investors including crypto exchange MEXC. Their smart contracts were verified by renowned security firm Certik (after initial verificationby ChatGPT). The project's test networks worked correctly.
Early project participants made Ethereum deposits through the bridge to farm the native ZKAS token. Initially, the project team promised that participants would be able to return their assets. However, in a post on April 20, ZKasino announced the launch of the network and changes to the original plan.
The platform claims that all ETH received were converted into ZKAS at a discounted rate of $0.055 with 15-month vesting.
“This transformation is done as a favor to our users who have joined the ecosystem,” the blog states.
Analysts from EmberCN drew attention to a suspicious transfer of funds to the Lido staking protocol produced by the developers. This happened after the developers changed the wording on their website, removing the statement about the possibility of returning ETH.
“ETH was contributed by ZKasino users for farming. As a result, the project team changed the official description of the site and forcibly exchanged ETH for their platform token,” the researchers explained.
Web3 developer cygaar reported that the launched casino ZKasino is actually an “Arbitrum Nitro chain”, the deployment of which took only two minutes. Additionally, he noted that the protocol does not use zero-knowledge proofs and EigenDA, despite claims made by the project team.
Hundreds of messages from ZKasino users who have clearly invested in the project are now claiming that the project is a known type of scam called an “exit scam.” Some users even circulated the personal information and address of ZKasino's founder, known as "Derivatives Monke," using the information to call for legal action.
*Exit scam is a fraudulent practice in which a project raises money to finance development and then disappears with investors' funds.
Venture capital firm Big Brain said it had never invested in ZKasino and said it thought the project itself was a scam.
“Big Brain Holdings invested in ZigZag Exchange in 2022, which subsequently resulted in financial losses for us. Some of the co-founders of this project are now part of the ZKasino team, which looks dishonest,” the company noted.
The alleged founder of ZKasino, under the username Derivatives Monke, responded in one thread to another user's message that he was "being sued for stealing $30 million": "You're a 60-year-old boomer hanging out with 20-year-old kids."
The ZKasino team did not make any other statements regarding the current situation.
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